Cotton purchasing and storage policy termination causes price decline. In January 2014, the State Council issued the Several Opinions Comprehensively on Deepening Rural Reform and Accelerating Agricultural Modernization, whereby the temporary policy for purchasing and stockpiling cotton was cancelled. For textile & apparel companies, in the short term, the gross margin will be reduced as a result of cotton price decline, raw material inventory depreciation and falling product prices. However, in the long run, the lower production cost is helpful to improve gross margin. Output Growth Continues to Slow. Over the past three years (2011-2013), the output growth of Chinese clothing enterprises above designated size fell from 17.68% in early 2010 to 1.27% in December 2013, with that in 2013 retreating by 4.93 percentage points against 2012, 6.87 percentage points from 2011, and 17.33 percentage points over 2010, showing an apparent slowdown.Online business burgeons. Compared with the sluggish growth of traditional channel consumption, the online channel of textile & apparel companies has seen rapid development, with proportion of sales in total revenue rising year by year. In the first quarter of 2014, China’s online retail sales exceeded RMB557 billion, a jump of nearly 46%, accounting for 9% of total volume of retail sales, thus becoming a new growth engine for domestic demand.

Apparel retail sales still stumble along the bottom, and subsectors divide. Due to the double blow of consumer recession and shunt of online channel, brand apparel sector that is heavily dependent on traditional offline channel is still in adjustment. In May 2014, the apparel retail sales of China’s top 100 large retailers saw a year-on-year increase of 5.4%, still 0.7 percentage points slower than that of the same period of last year.After three years of adjustment, the division of subsectors in brand apparel sector is even more apparent, with casual clothes and home textiles casting off high inventory and the market resuming growth, children's apparel and outdoors wear enjoying huge space for development, and menswear and high-end men and women wear being in a period of adjustment in the short run.